Health Biz: Divide still wide on AHPs


WASHINGTON, April 21 (UPI) -- Banter at the Senate Small Business and Entrepreneurship Committee was collegial this week and lawmakers' promises of bipartisan cooperation numerous, but when it came down to the details, Democrats dug in their heels and opposed Republican legislation allowing association health plans.

The Bush administration has proposed AHP legislation several times. It would allow industry associations to offer health plans to their members as a way to help small businesses afford insurance for their employees. The idea adapts the tactics of big businesses and labor unions, which capitalize on their huge numbers to negotiate better premium rates.


The most recent AHP legislation passed the House, but went nowhere in the Senate. Wednesday's hearing suggested not much has changed.

"We have strong evidence that AHPs just don't live up to their billing," said ranking minority member Sen. John Kerry, D-Mass., who wants to look at other options.


Kerry suggested one alternative is his presidential campaign platform component, which called for setting up a risk pool for small businesses and individuals in a program similar to the Federal Employee Health Benefits Program. Committee Republicans strongly backed AHPs.

"I strongly believe association health plans can play a major role in addressing this country's healthcare crisis," said committee Chairwoman Sen. Olympia Snowe, R-Maine. "AHPs will bring necessary reform to insurance markets that have long trapped small business and their employees in a vicious cycle of rising costs."

Snowe authored S. 406, the Small Business Health Fairness Act of 2005. Its companion bill in the House, H.R. 525, was introduced by Rep. Sam Johnson, R-Texas, and it passed the House Education and Workforce Committee in March.

Democrats agree small business needs help and Kerry noted insurance premiums in some cases have risen 70 percent. About 63 percent of small businesses offered the benefit in 2004, down from 68 percent in years prior.

Democrats do not like key parts of the AHP legislation and are joined in that cause by the National Small Business Association, as well as the lobby groups America's Health Insurance Plans and the Blue Cross Blue Shield Association. The National Federation of Independent Business, on the other hand, supports S. 406.


The most vexing detail for opponents is jurisdiction. Instead of placing AHPs under state regulation, the legislation would bring them under the federal umbrella of the Department of Labor, which regulates large businesses and labor unions that self-insure their workers under the Employee Retirement Income Security Act or ERISA.

Alissa Fox, BCBS's executive director for policy, told UPI's Health Biz that comparing state regulations with federal regulations on insurance is "night and day."

Fox said states have enacted consumer-protection laws that ensure health plans have the money and pay health claims when they are submitted by healthcare providers.

"What they (supporters) are saying is the way we regulate a single employer (under federal ERISA laws) paying health benefits for their own employees -- and is on the hook to pay those benefits -- is the way we're going to regulate an AHP, which is going to do everything an insurance company does."

The Labor Department, she said, tends to look at problems only when a pattern of activity emerges, but in insurance, by that time, people are left with unpaid claims.

Labor Secretary Elaine Chao appeared before the Small Business committee to defend her department's ability to oversee AHPs. She said the legislation provides a "level playing field for small business," which would see a 13 percent to 25 percent reduction in the cost of providing health benefits for workers.


She also said the Labor Department has extensive experience and capability in governing group insurance that covers millions of Americans under ERISA.

"We feel very confident about our ability to regulate (AHPs)," Chao said, and described how Labor would ensure solvency of AHPs and strengthen protections against unscrupulous groups that might try to game the system.

Hector Barreto, head of the Small Business Administration, said small businesses, which make up the backbone of the U.S. economic structure, are struggling to offer benefits and losing the battle.

"It's a terrible way to treat people who are keeping our businesses afloat," he said.

The NSBA, however, has a detailed paper on AHP's mechanical problems. It said states regulate health-insurance rates in the small-group market either through rate bands with a range of costs, or through community rating, which sets a premium for all participants in that area. The legislation would require AHPs to adhere to rate bands in the state where they are headquartered -- allowing them to apply that rate to all other states in which they operate.

According to the NSBA, a plan with either a wide rate band or no band, and selling in a state that uses community rating, would mean significantly lower rates for younger, healthier people than for older, sicker groups. That would lead to those younger, healthier folks going into AHPs, leaving the traditional pools with the older and sicker employees. That would drive traditional insurance pool rates up, which ends with the so-called death spiral as the plan becomes financially unviable and self-destructs.


Testifying Thursday before the Senate Health, Education, Labor and Pensions Committee, Karen Ignagni, president of America's Health Insurance Plans, noted the Congressional Budget Office has estimated 82 percent of small business workers would pay higher premiums under AHPs.

CBO also found most AHP participants would be people switching from traditional health plans rather than employees who did not have insurance previously. So as AHPs increase, traditional insurance enrollment decreases or has substantially higher rates, resulting in an increase in the number of uninsured, rather than a decrease, as proponents have claimed.

The legislation answers the so-called cherry picking issue, Republicans contend, by requiring AHPs be offered to all employees -- young, old, sick, healthy. Kerry said, however, AHPs could legally cherry pick by not allowing all businesses into the association.

Sen. Jim Talent, R-Mo., said AHPs are not "revolutionary change on an ideological level" but simply allow small business to do what big business does ... "because there are economies of scale to insuring big pools."

"I'm for people banding together. I'm for economies of scale," Kerry said. "The problem is that's not all that it does."

Ignagni testified insures negotiate discounts from doctors and hospitals based on their entire block of business, large and small groups.


"Because AHPs would represent small businesses only, it is unlikely that they could negotiate physician and hospital discounts that match or exceed those provided by health insurance plans covering both large and small employers," she testified.

Sen. Conrad Burns, R-Mont., said when he goes home and talks to small business owners, "it seems like it goes from conversational chatter to screaming about doing something about the affordability and access of healthcare."

Burns said he has reservations about the bill but the small business community cannot wait for perfection so he'll support it.


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